From 1949 to 1980, US electricity consumption grew at 7% CAGR – nearly twice real GDP. After 1980, this dropped to 2%, or two-thirds of GDP.
The chart below illustrates two dynamics (both as five-year moving averages to approximate the average economic cycle):
- relative growth of GDP to consumption, and
- GDP-per-KWh (adjusted for total households).
(For consumption, we use total sales to residential, commercial, industrial and transportation sectors.)
Significant decade-by-decade patterns underlie the long-term trend:
In the 1980s, the PC emerged as a potent energy-burning productivity tool, and economic growth began surpassing consumption growth. In the 2000s, the Internet produced the same effect, and this differential accelerated.
Low inflation and consumer electronics penetration contributed to higher GDP-per-KWh in the 50s and 60s; GDP per household, though, was also low.
Key factors separate the 2000s from the 1990s, resulting in higher GDP-per-KWh: IT productivity, financial leverage (a not-unrelated factor) and new revenue opportunities in emerging markets (also not unrelated).
The 1990s, in contrast, witnessed an enormous peace dividend. This opened military industrial capacity to private consumption; the information revolution did not arrive until late in the decade.
Once again, political upheaval is underway: a throwback to Keynesian economics. Unlike prior periods, vast commercial networks interconnect the global landscape, while the Internet continues to shrink the world.
More than ever, electricity efficiency reflects global competition for capital.
So what now? Does government intervention stifle this efficiency? Would the Internet economy allow this to happen?